Sunday, 22 April 2012

Bitcoin being a product of technology faces far greater dangers from hackers than normal currency would face. Bitcoin is not just vulnerable on the technology front where it has to upgrade constantly with new patches and versions to improve and combat threats. Another front where it is vulnerable is that 90% of the Bitcoin Exchange trade is done through Mtgox. An attack on Mtgox would cause tremendous tremors to be felt in the Bitcoin Community.

This happened on 19 Jun 2011 when hackers attacked Mtgox and transferred 25,000 Bitcoins were transferred from 478 accounts. The attempts to sell the stolen coins plunged Bitcoin to 0.01 cents. Bitcoin prices recovered subsequently but the incident does show the vulnerabilities.

A nice Youtube explaining more in detail about Bitcoin. There are a lot of people still apprehensive about Bitcoin, it is still difficult to get and also not many merchants accept it. But I guess the same as for all innovations, it takes time for the mass to adopt it.

Saturday, 21 April 2012

Given the extremely high difficulty of Bitcoin mining now, it may take months before an individual mining rig manage to solve and receive a block of 50 Bitcoins. Therefore sites started to appear which pool together the hashing power of the individual rigs so as to combine them for Bitcoin mining and based on the hashing power, each time a Bitcoin block is solved, the 50 Bitcoins are shared among the miners. Therefore payouts are much more frequent especially in the bigger Bitcoin Pools.

Bitcoin pools do require resources such as servers and bandwidth to operate not to mention the manpower involved in maintaining the Bitcoin Pools, therefore most of them charge a small percentage of the Bitcoin produced as their fees. But I feel that Bitcoin Pools are a Win-Win situation unless you are a large Bitcoin Rig operator able to do Solo Mining with enough hashing power to produce the Bitcoins on a regular interval.

Friday, 20 April 2012

I have heard of Bitcoin miners specially turning on their Bitcoin Mining Rigs during Winter time to heat up their houses, no joke. This is how hot Bitcoin Mining can be. I am doing mining and I do know. Try running 4 GPU 6990 Radeon together in a Bitcoin Rig and you will see the heat. The heat can even melt the casing if you do not have proper cooling.

For large and concentrated Bitcoin Rigs, you basically need to customized a cooling system for the Bitcoin rigs. I am running a few Bitcoin Rigs and the heat is so much that I ended up putting the rigs in a datacenter with special cooling. It is costly, but as a geek into Bitcoin, I love Bitcoin Mining and costs is one factor, interest is the real thing

Wednesday, 18 April 2012

The Bitcoin has enjoyed a lot of attention and support just by looking at the difficulty in generating a Bitcoin. From the chart given by Bitcoin Difficulty SIPA, it can be seen that since Jan 11, it has increased from near zero at the start to more than a million in terms of difficulty.

Previously normal CPU was used in the mining when there are idle CPU cycles and Bitcoin miners do not use specialized mining equipment. But as the difficulty increases more and more, it was found that it was impossible to just use CPU for mining. But it was found that GPU such as Radeon 6990 etc was extremely efficient in the solving of Bitcoin algorithms and hence mining. Therefore specialized Bitcoin mining rigs full of GPUs are setup for mining purposes. Such GPUs generate a lot of heat and use up a lot of power, therefore one has to calculate the cost of power versus that of the cost of a Bitcoin. Basically you do not find anyone using CPU mining nowadays for Bitcoin.

When I first started, I do not have any knowledge on GPU etc, I used an online CPU Bitcoin generator.

It takes a very long time just to generate 0.00003073 Bitcoin using my CPU in 0.51 hours and mine was a six core new computer! It was running at 2 mhashes per second. But a cheap low end Radeon 5760 can easily generate 200+ mhashes per second, therefore why everyone switch to GPU mining.

Sunday, 15 April 2012

As we know, there will only be 21 million Bitcoins in the world. Suppose Bitcoins become popular all of a sudden, will there be enough Bitcoins to go around? I guess there is nothing to worry as Bitcoin's smallest denomination is 1 Satoshi which is 0.00000001 BTC, so we do have a lot of Bitcoins to go around should it get popular, and I certainly hope that it would. Based on 1 Satoshi, there will be theoretically 2.1 Billion Bitcoins of 1 Satoshi each. May not be enough to power a nation's economy but certainly enough as a transaction media on the Internet and virtual world.

I am thinking how nice will it be if the current popular games start to use Bitcoins and unified the virtual worlds instead of having so many different currencies such as WOW Gold, Linden Dollars etc. It will be a very good start in establishing the Bitcoin as the de facto currency in the virtual worlds. You do not have to be a very good programmers like those in charge of the Bitcoin project or a Billionaire to promote Bitcoins, give one or two Satoshi among your friends, ignite the curiosity in them and maybe one day we will have a real, popular online currency known as the Bitcoin.

Saturday, 14 April 2012

Bitcoins have a few hard rules that are consistently enforced and will not be changed no matter what. These are

1. A total of 21 million Bitcoins
2. Bitcoins can be divided into 8 decimal places
3. There may be zero or tiny amount of transaction fees

Bitcoin Client are maintained by volunteers. These developers are skillful and unpaid dedicated programmers maintaining Bitcoin Client at their own expenses and time. Bitcoins are normally released as the main release with beta releases for developers.

So we have our Electronic Wallet for Bitcoins, and given that the Bitcoin Faucet doesn't really give you much, actually just for playing around and if you need some more Bitcoins and are interested to explore mining some of the Bitcoins yourself, you will need to understand this.

You can see that the difficulty is 1577913, what does that mean for you. Difficulty times 2^32 (4,294,967,296) divides by your hash rates give you the average time to find a Bitcoin Block. Taking your Hash Rate as 1 Ghash/s which is not to be laughed at. 1,626,553 x 4,294,967,296 / 1,000,000,000 = 6,985,992 seconds = 80 days. It will take you 80 days to find a block of Bitcoins. At this moment, the number of coins in a block is 50 which is about US$250, meaning it takes you 80 days to earn $250, not to mention the electric bills and the costs of building a rig. There are two major methods, one is through building a rig using a mother board and GPUs, the other is using FPGA. GPU rigs are very power intensive and your power bills will be huge where FPGAs though aren't power intensive cost more than GPU rigs when you are buying them. So do you also need the patience to wait an average of 80 days? Not actually, there are mining pools which we will talk about later.

You may now have a question. Bitcoin is just a virtual currency, not being underwritten by any government, how do you know the Bitcoins in your electronic Bitcoin Wallet has value? Bitcoins value can be estimated from how much it can be exchanged for say US dollars. You can actually do the Bitcoin to US Dollar Exchange online. My link is only one of the many, there are even exchanges to exchange for Linden Dollars etc. It is a fairly fun and active market now here. Reason why I link to Mtgox is because at current they are the largest Bitcoin exchange and they do a brisk business exchanging dollars for Bitcoins and vice versa.

Friday, 13 April 2012

As in any innovative idea, there is always a niche community with similar likes promoting it. Bitcoin with its extremely diverse audience definitely need a location where one could chat about anything and everything under the Sun about Bitcoin. Exchanging ideas, announcing new technology or patches, buying and selling of Bitcoins or goods and services through Bitcoins or even general chat. Bitcointalk is definitely a good place to start with.

There is a lot of things to talk about Bitcoins, there are also a lot of interesting development on other similar type of coins as Bitcoins. Do join and participate in this interesting and fairly active community.

Wednesday, 11 April 2012

Bitcoin does have a price and also a way of conversion from Dollars and Sense of the real world to that of the virtual Bitcoin. One of the largest Bitcoin Markets are Mtgox. They list down the prices to be bought and sold and allow the transactions between buyers and sellers.

Tuesday, 10 April 2012

If you had read the previous post on the setup of the Bitcoin Client, you will also have your Bitcoin Wallet and Bitcoin Address now. The next thing is where to get some Bitcoin for your curiosity and also for testing. You can get some Bitcoins here. It isn't much, but it is a good practice for you to get some Bitcoins for your first time. After you add in your Bitcoin address and the necessary information, you will need to wait about 24 hours for the Bitcoin to arrive to you. Do remember to have your Bitcoin Client Sync so that the Bitcoins can be received. If you see a transaction with a minute amount of Bitcoin, you are Successful! Congratulations of being a First Time Bitcoin Owner!

Once you installed the Bitcoin Client which gives you the Bitcoin
wallet, you will notice that you have Bitcoin addresses such as:

With this address, other Bitcoin users can send Bitcoins to you for payment or you can get from others' their Bitcoin addresses and send Bitcoins to them for payment. For those doing Bitcoin mining, the Bitcoins that they mined also appear in this Bitcoin Client.

The Bitcoin needs a place to store and also a wallet to transact etc. This function is fulfilled by the Bitcoin Client. Download the Bitcoin Client, install it and you will have your own encrypted Wallet for Bitcoin storage and transactions. In order to install, first click on the Windows EXE installation if you are using Windows like me, or you can install other versions of Bitcoin running under Linux, Mac etc.

Once the installation completes

Save and install the file.

Answer the Installation Questions and Click Next.

Bitcoin will start running and begins to synchronize the Bitcoin Chains. You have completed the Installation of the Bitcoin Client.

Monday, 9 April 2012

You may wonder since Bitcoin is virtual, after mining, where does the Bitcoin goes or how do you know how many Bitcoins you have, how do you store the Bitcoin, how do you do transactions using Bitcoins. These are questions I was asking myself. It took me a lot of googling and actually trying out myself to find out. I am creating a small tutorial on this for my next blog post.

In the meantime, do enjoy some more of those Bitcoin Youtube on the mining aspects. For me as a technie, the most interesting part of Bitcoin is building a lovely rig. There are a lot of things to learn and I blow up a lot of components before getting them right.

Bitcoin are not minted by any governments, it is a virtual coin meaning that you are not going to see any physical coin. So how is it produced and how do you know it is of value? Bitcoin is "mined" by solving complicated algorithms so that "work" is done to produce the Bitcoins. The mining is done initially by normal computer with CPUs. But as the popularity of Bitcoins increase, there are more and more miners and hence the difficulties of producing the Bitcoins increased.

Bitcoins are so difficult to produce that normal computer CPU would take far too long to solve the algorithms and to produce the Bitcoins. Instead it was found that GPUs especially ATI GPUs having a lot of processor units inside each GPU is extremely suitable for the solving of such algorithms. Mining Rigs with multiple GPUs in each rig are constructed for the "mining" of Bitcoins instead.

GPUs consumed a huge amount of power and produce a tremendous amount of heat. Mining Bitcoins aren't cheap considering the amount of power needed to power the GPUs and to cool the GPUs. There is an interest towards producing FPGA specializing in the solving of the Bitcoin algorithms. As the FPGAs get more powerful, it is hopeful that some Bitcoin mining be taken over by the FPGA which is more expensive but cost less to run due to the much lesser power required.

Sunday, 8 April 2012

Bitcoin was invented by Mr Satoshi Nakamoto. Whether if this is his actual name remains unknown. There is no attempt by the founder to come out into the open. No one knows for sure who he is. There is a lot of investigative works and guesses about his identity, but that's about it. No one really comes close to identifying him.

He wrote a non peer review paper on Bit Coin.
This was the origins of the Bitcoin project. From his papers, bitcoin
client which allows for the creation of Bitcoin wallets to store and do
transactions with Bitcoins as well as huge mining rigs for Bit Coin
mining was setup. He remains a mystery but his Bit Coin was spreading throughout the world. It isn't really wide spread but still the niche size of those interested in Bit Coin is quite large and a lot of money was also spend on specialized mining rigs to generate Bit Coins.

I think not many people know what is a Bitcoin unless you are inside the very small community. Bitcoin is virtual, there is no physical coins to represent a Bitcoin. Bitcoin is not minted by any government or authority. It is generated by powerful computers solving complicated algorithms. Curious isn't it? Bitcoin is not imaginary. Even though it is no physical but virtual but it does command a value. At the moment, one Bitcoin is equal to nearly US$5. I am starting this blog because of my interest in Bitcoin. I am also like you, just found out about this amazing currency and trying to learn about it. I hope to learn about Bitcoin and also hope that you will follow me as I continue my journey of Bitcoin.